The Rise of Snapchat
For the founders of Snapchat, the past few years have been an amazing feat of innovation and entrepreneurship. Few people can take a useful app for people to share pics that vanish instantly and turn it into a thriving business, but for the founders of Snapchat the challenge was almost as fun as the ride.
The company is run by co-founders Evan Spiegel and Bobby Murphy, who have pushed the company to a private valuation of almost $25 billion. For Snapchat, the company took advantage of a stagnant social media market and improved on a lack of privacy that often hurt so many users in the past. This is the first social media platform to be tapped as the biggest thing since text messaging hit for a new generation of users and for many of the same reasons text messaging was even popular to begin with. However when Snapchat IPO does get ready to launch what should we expect as digital marketers? The ripple effects are hard to predict.
Tech IPOs Face A Rough Ride
There seems to be a consensus dream among people in the digital field where someone will pick a great idea that will gain insane amounts of popularity, develop a substantial user growth rate, and then eventually cash out via an IPO. However, not every company can be the next Google or Facebook and just because an IPO launches doesn’t always guarantee success. As we documented with Twitter a few weeks back, the tech industry is full of ups and downs. Although less volatile than other fields, the tech industry is not immune to failing public companies.
One only has to look a few years back to GoPro, whose public launch promised huge gains in 2014 with a $24 IPO launch only to drop under $10 a share today. This was an example of how inflated tech goals, and mismanaged product launches can send companies into a downward spiral. For Snapchat the pressure is on its Spectacle glasses launch and countering companies like Facebook, which recently copied its popular “stories” feature, with ways to differentiate itself. Financially, Snap has $150 million in liquid cash and $837 million in bonds and other securities. For 2016, the company earned $404.5 million in revenue in 2016, mostly from ad sales, but still took a loss due to an overwhelming amount of expenses and hosting server fees. Contrast this with Facebook who was already almost a decade in at the time of its valuation and making over a billion in profit a year in 2012.
Will User Rates Hold Up?
Unlike other tech companies, Snapchat is aware that at some point its rapid user growth is going to plateau. Snapchat admitted that its growth in 2016 was starting to falter and even admitted how the later half of 2016 saw a sharp drop due to the fact that many competitors launched products with similar functionality. Also one must keep in mind that with Snapchat the user usage rate declines with age. It’s almost strictly an app for those between 16-30 and after 25 the average time on the app declines per user. With consumers being so volatile in their loyalty who honestly knows how long the company can sustain itself. There is tons of press revolving around the doubts of a Snapchat IPO but for every GoPro disaster there’s always that silver lining. Also, one must keep in mind that with Snapchat the user usage rate declines with age. It’s almost strictly an app for those between 16-30 and after 25 the average time on the app declines per user. With consumers being so volatile in their loyalty, who honestly knows how long the company can sustain itself.
Snapchat IPO For Digital Marketers
A Snapchat IPO means more opportunities to leverage content with some of the world’s biggest publications. Companies like Complex Magazine and Vice are a few that has embraced the platform as a revenue sharing venture. The demographic that consumes Snapchat the most is also parallel with the demographic that watches TV less than any other group. There is distinct value in reaching this group and Snapchat has used in-feed ads in order to take advantage. With a successful public offering expect to see more efforts put into monetizing user engagement and that means even more ways for advertisers to reach potential consumers for their clients. Digital marketers still skeptical about Snapchat should at least look forward to the possibilities that comes with the success of its IPO. A thriving Snapchat means a more connected digital world and that’s something everyone can be satisfied with.